Letting with Power of Attorney Proposal?

SammyWhite

Hello
My mother-law is in a prestigious private care home and her ‘gold-plated’ pension (plus savings) will always be more than sufficient to afford her the best of care. She is a higher rate tax payer at the age of 89.
Her two children hold Power of Attorney over her financial affairs and they have proposed that I be appointed their official agent in charge of letting and managing a property of hers.


They suggest that I charge the full rental income for my services as agent and I will pay tax on this income. They will then offset my agent fees against their mother’s tax liabilities.


Does anyone believe that this arrangement is allowed under present systems?
Many Thanks

Annisele

I'm not certain, but I don't think it would be allowed.

The first problem is that the attorneys are required to act in the best interests of your MiL. Presumably a normal estate agent's fee wouldn't be the entire rent - so giving you all the money wouldn't be acting in MiL's best interest.

Secondly, if the attorneys do anything that benefits themselves they're (generally) supposed to get approval from the Court of Protection. It sounds like you might be married to one of the attorneys, which makes the whole affair smell fishy.

Thirdly, I doubt you'd get the tax offsetting past HMRC. It looks like a tax dodge rather than a proper commercial arrangement.

Fourthly, there are only limited circumstances in which attorneys can delegate responsibility - and there are limits to the amount attorneys can be paid. I doubt you'd be able to charge in these circumstances.

I suspect there are plenty of other issues, but I'm not an expert in this area - so it's quite possible everything I've said above is wrong. If you're unsure, you could always ask the Office of the Public Guardian for an informal opinion.

G_M

I partly agree with Annisele but not entirely.

Yes, POAs must act in the best interests of the Principal. Clearly charging a tenant rent and allowing a family member to keep that entire rent is depriving MIL of the income, so is not in her best interests.

However, if you charged a 'fair' fee for acting as agent, with the remainder of the rent going to MIL's account, I see no difference between that and appointing a High Street letting agent.

I doubt the Court of Protection would object to a fair charge, but yes, if a family member is benefitting to the detriment of the Principal then the CoP would take a dim view.

If the income you received was taxed properly I don't see why HMRC would object. But as with the issue of 'best interests' above, if it was the full rent then yes, HMRC would likely see that as tax evasion (since the Principal's rental income should be taxed).

POAs must bear in mind that the money invloved is not theirs - it belongs to the Principal. That includes the income generated by the Principal's property or investments.


I assume they have the correct POA....

https://www.gov.uk/court-of-protection

http://www.adviceguide.org.uk/england/relationships_e/relationships_looking_after_people_e/managing_affairs_for_someone_else.htm

Annisele

I didn't express myself very well. I think I agree entirely with G_M - but since he thinks I don't, I can't have been clear!

Assuming he means the same thing by "fair fee" as I do by "proper commercial arrangement", I think we agree.

G_M

Since this thread here has degenerated into linguistic analysis, perhaps we should consider, Annisele, whether a 'proper commercial arrangement' is indeed a fair fee....

SammyWhite

Why is this arrangement 'detrimental' to her family?

She will never be deprived of anything. But her grandchildren could do with some money to help their education and house deposits. This in turn would help society in the future.
My in-laws were very generous in this type of support in the past to their children and if able, would continue to support their grandchildren likewise – we all know that.
But it appears that a Power of Attorney removes the ability of people to support their family when it is needed - even when their Wills are registered making thir children sole beneficiaries.

Mardle

Do you have a paper trail showing the level of gifts made in the past? If you do then it is possible that the Court of Protection would allow the attorneys to continue to make such gifts.

G_M

SammyWhite wrote: »

Why is this arrangement 'detrimental' to her family?

Nobody said it was 'detrimental to her family'. We said it was not:

" in the best interests of your MiL " and "depriving MIL of the income"

OP said:
"They suggest that I charge the full rental income for my services as agent". Now, I know letting agents have a reputation for high fees, but since when did an agent take the full rent as their fee? And how many LLs would continue to let their properties if they received NO rent?

The POSs are responsible for the Prinicipal's money - note, the property assets, savings and income over which they have control belong to the Principal. It is not (yet) 'family' money, and a POAmust act not in ther own best interests or the best interests of the family, but the best interests of the Principal. They are acting as attorneys, not as relatives.

Now, as Mardle says, IF the Principal was clearly in the habit of giving regular gifts to the family (Christmas, birthdays or even just regular annual gifts etc) then it would be reasonable for the attourney to maintain this habit. But it would not be reasonable (or legal) to unilaterally decide to give the Principal's money away just because the family wanted, or even needed, it